According to The Australian Financial Review today, Japan's Jera Co said it's in talks with other LNG companies to create an alliance of buyers that account for more than one-third of global trade.
Jera, a joint venture between Tokyo Electric Power Co and Chubu Electric Power Co, is seeking to cooperate with Korea Gas Corp and China National Offshore Oil Corp on liquefied natural gas procurement and investment, said Hiroki Sato, vice president of the company's fuel buying department. A memorandum of understanding may be signed as early as Friday, he said.
A deal between the companies may lead to the creation of a potentially dominant bargaining alliance as buyers band together to take advantage of new supply from Australia to the US that's tilting negotiating power in favour of consumers.
"We can work hard to lower prices by using our large volumes," Sato said in an interview in Tokyo Thursday. "The bottom line is we should work together to reduce costs in Japan, as well as the rest of Asia."
The deal will benefit smaller companies outside the group as lower prices would be passed on to other buyers, Sato said. The alliance members would also be able to swap or trade cargoes among themselves to help balance supply between their operations.
Asian spot LNG prices fell below $US5 per million British thermal unit for the first time last month, extending its tumble from a high of $US19.70 in February 2014, according to New York-based Energy Intelligence. Cargoes bought through long-term contracts, which are traditionally linked to oil, may fall to a low of about $US4.10 per million Btu by June, Credit Suisse Group said in a report February 5.
Jera has said the combined Tokyo Electric and Chubu Electric purchases would be about 40 million metric tons a year of LNG. Korea Gas imported 31.4 million tons in 2015 and China National Offshore imported 14.1 million tons in 2014, according to the companies. Global LNG trade rose 1 per cent in 2014 to 239.2 million tons, according to the latest annual report by the International Group of Liquefied Natural Gas Importers.
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